Kehinde Fajobi
The combined debt of Nigeria’s 36 states rose to ₦11.47 trillion by June 30, 2024, according to the Debt Management Office (DMO), reflecting a 14.57% increase from ₦10.01 trillion in December 2023.
This increase persists despite the states’ allocations from the Federal Accounts Allocation Committee (FAAC) and their internally generated revenues (IGR).
The states’ external debt, including that of the Federal Capital Territory (FCT), rose from $4.61 billion to $4.89 billion in the same period.
Due to the naira’s devaluation from ₦899.39/$1 in December 2023 to ₦1,470.19/$1 by June 2024, these dollar-denominated debts translated to a naira increase of 73.46%, moving from ₦4.15 trillion to ₦7.2 trillion.
However, domestic debt for the states and FCT dropped from ₦5.86 trillion to ₦4.27 trillion.
Overall, the states and FCT made up a reduced share of Nigeria’s public debt at ₦134.3 trillion as of June 2024.
In a related report, BudgIT’s “2024 State of States” found that Nigerian states relied heavily on federal allocations to sustain their budgets.
The report revealed that 32 states depended on FAAC allocations for at least 55% of their revenue in 2023, while 14 states relied on these funds for over 70% of their income.
This heavy dependency left states vulnerable to fluctuations in oil revenue and other external shocks.
BudgIT highlighted that FAAC funds accounted for 62% of the recurrent revenue in 34 states, excluding Lagos and Ogun.
Furthermore, 21 states depended on federal transfers for over 80% of their recurrent revenue.
BudgIT’s data showed that in 2023, states’ combined revenues grew by 31.2%, rising from ₦6.6 trillion in 2022 to ₦8.66 trillion in 2023, driven by a 33.19% rise in FAAC allocations.
Lagos was the highest revenue contributor, generating ₦1.24 trillion, about 14.32% of the total revenue of all states.
The report highlighted Lagos and Rivers as the only states able to cover their operating expenses with internally generated revenue, posting IGR-to-operating-cost ratios of 118.39% and 121.26%, respectively.
Other states, such as Akwa Ibom, Bayelsa, and Taraba, required over five times their IGR to meet expenses, depending largely on federal allocations and external aid.
On improving revenue sustainability, BudgIT advised, “The states need to digitise revenue collection, eliminate cash transactions, deploy tax intelligence to assess high-net-worth individuals, enforce compliance, and harmonise taxes.
“Achieving fiscal viability and long-term sustainability depends on strengthening local revenue systems to support critical infrastructure and social needs.”
The report emphasised that states must leverage technology, public-private partnerships, and resource endowments to meet demands, including the new minimum wage and infrastructure investments.